Note to Ben Bernanke: Beware the Ides of Time

Congratulations to Fed chairman Ben Bernanke on being selected as Time magazine’s Person of the Year. As I’ve said numerous times, I think the Fed did a terrible job in the period from 2002 to 2007, pumping up the property bubble with its low-interest-rate policy, going AWOL on the regulatory front, and chronically underestimating the dangers that the subprime bust represented to the rest of the economy. But once Bernanke and his colleagues grasped the scale of the problem—that realization came at the end of 2007—they, in partnership with the Treasury Department, did a good job of preventing a wholesale collapse of the financial system. This judgment stands even though their rescue measures created some big problems for the future, such as enshrining the too-big-to-fail doctrine.

After all he’s been through, Bernanke deserves a few plaudits. If I were he, though, I wouldn’t put much credence in appearing on the cover of Time. As I noted in Dot.Con, my 2002 book on Internet bubble, newsweekly covers often serve as a good contrarian indicator. Once a person or company reaches that level of public acclaim, they have usually been over-hyped and over-exposed. Often, the only direction they can go is down.

Take this cover, from February, 1999, which was entitled “The Committee to Save the World.”

The three cover boys—Alan Greenspan, Bob Rubin, and Larry Summers—were then being lauded for their adroit handling of the Asian financial crisis. Today, they are in disgrace, their reputations destroyed by the roles they played in creating the regulatory free-for-all that gave rise to the current crisis.

In case you don’t recognize the bare-footed cover boy, it is Marc Andreessen, founder of the long-defunct Netscape, the web-browser company, who was last heard of buying into another perennial loss-maker, Skype.

Virtually ever since Barack Obama edged out Hank Paulson, Bernanke’s mate in the foxhole, to nab Time’s 2008 award, his approval rating has been dropping.

In fact, the Person of the Year award may be the ultimate reverse indicator. As a blogger at the Wall Street Journal noted today, past winners include Stalin (twice—1939 and 1942), Yasser Arafat (1993), and Rudolph Giuliani (2001), none of whom are exactly popular these days. And you can add to that list General William Westmoreland (1965), Richard Nixon (twice, 1971 and 1972), Henry Kissinger (shared with Nixon in 1972), Bill Clinton (twice—1992 and 1998), Newt Gingrich (1995), and George Bush (2000)—all of whom suffered subsequent reversals.

Maybe Bernanke should think twice before accepting the award!

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